Don't give your kids pocket money if you want them to save

Giving children pocket money may actually work against them learning to save.
Giving children pocket money may actually work against them learning to save. Ryan McVay

CHILDREN who are given pocket money become poor savers, according to research which casts doubt on the wisdom of parental generosity, at least in terms of shaping a youngster's  financial rectitude.

Academics asked children about their income and outgoings, and found that those who were given a weekly sum free by their parents were less likely than those with a part-time job to put money aside.

The ability to save - or nor - tended to remain the same in early adulthood, the researchers found.

Sarah Brown and Karl Taylor, of the Department of Economics at Sheffield University, wanted to determine how parental attitudes and help shaped spending and saving habits.

They looked at the responses 6,000 children aged between 11 and 15 gave to the British Household Panel Survey, an annual study carried out by Essex University's Institute for Social and Economic Research.

Pocket money dramatically lowered the chance that a child would save. A  1 per cent increase in a child's allowance was associated with a 22 percentage point fall in the probability of saving.

Aside from the provision - or not - of cash, parental attitudes to money did not make much difference to  children's behaviour, with the amount that parents saved having no impact on the savings habits of their offspring.

The exception was that parents who were generally optimistic about money tended to have children who were less likely to save.

The study was presented to the annual conference of the Royal Economic Society.

The authors concluded: "Our findings suggest that the amount of the  allowance or pocket money that the child receives from their parents is inversely associated with the probability of saving. In contrast, earnings from part-time work are positively associated with the probability that the child saves.

"Hence, different sources of income received by children appear to influence their saving behaviour in contrasting ways."

A line in the 30-page research puts the point more simply: "The results indicate that the child's allowance is negatively associated with the probability that the child saves."

Topics:  editors picks parenting pocket money saving money

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